Increase Chances Of Auto Loan Approval With Bad Credit
Having a bad credit rating up front can be a big drawback when looking to take out a car loan. However, there are lenders who help borrowers with credit problems, and we have some tips to increase your chances of qualifying for vehicle financing.
Step 1: Know your credit situation
When you apply for new credit with a car lender, they are likely to look at your credit reports to get a better idea of ââyour credit history and who you are as a borrower. Before you do anything else, be sure to check your credit reports and your score to see what lenders are seeing.
Your credit score determines a large part of your eligibility for a car loan. A high credit score can help you benefit from lower interest rates, increase your chances of being approved for higher loan amounts, and overall improve your chances of qualifying for a loan. car loan.
Step 2: Choose the right auto lender
If you know your credit history is bad, then choosing the right car lender can help you increase your car loan eligibility.
There are many different auto lenders to choose from. Most consumers think that banks or credit unions are the go-to for their vehicle financing needs, but most dealerships are also registered with third-party lenders who may be able to help borrowers with problems. unique credit.
- Banks and credit unions – Direct auto lenders. They offer pre-approvals, may be able to offer competitive interest rates, and generally require borrowers to have good credit.
- Captive lenders of automobile manufacturers – Third party lenders such as GM Financial, Kia Motors Finance and Ford Motor Credit. Captive lenders are known to offer great deals and discounts, and many typically require borrowers to meet high credit score requirements.
- Lenders at risk – Third party lenders specializing in assisting borrowers with credit problems have registered with special financing dealers. Usually require several documents to better understand a borrower and their credit rating.
- Internal funding – Usually offered to buy here pay here used car lots, where the dealer is the lender. A credit check may not be required, only used vehicle sales, and it may be necessary to provide a high interest rate to compensate for the lack of a credit check.
It can be difficult to meet the credit score requirements of a traditional auto lender, such as a bank, credit union, or captive lender.
If you have been turned down for vehicle financing with traditional lenders because you have credit issues, then checking with other lenders such as a subprime lender or inside finance dealership could mean a greater chance of ‘get approval for a car loan.
Step 3: Consider a co-signer
If you’ve never borrowed money before, or if your credit history isn’t great, a co-signer can be a great way to increase your chances of getting a car loan approved. Co-signers help you meet a lender’s credit score requirements. They also promise to repay the loan if you become unable to do so, so they act as a back-up payer which further secures the loan.
Not everyone has the luxury of having a family member ready to co-sign a car loan. However, there is usually no restriction on who your co-signer can be – a family member, friend, or even a coworker could be your co-signer if they have sufficient credit. The only common exception is that your spouse cannot be your co-signer.
Step 4: have a deposit
One thing you can do to increase your chances of qualifying for a car loan is to have a down payment. Down payments reduce the amount you need to finance, lower your monthly payment, and show lenders that you are ready to invest some of your own money in the vehicle.
Generally, if you have poor credit, expect to need at least $ 1,000 or 10% of the vehicle’s selling price. In many cases, the more funds you can put in, the higher your auto financing eligibility.
Step 5: Buy Realistically
If you have bad credit, this might not be the time to finance your dream car. With low credit, it’s often recommended that you choose an affordable used vehicle that meets your transportation needs without breaking the bank.
Used cars are generally less expensive than new cars, and even certified used vehicles are generally more affordable. And, if you’re working with a lender who helps borrowers with credit problems, there’s a good chance you’ll need a down payment.
It will likely be easier to meet the down payment requirement on a used car, given the lower selling price of used vehicles. Choosing an affordable car can also mean lower monthly payments, which can increase your chances of successfully paying off the loan, and therefore your eligibility.
Step 6: Find a dealer for your credit needs
Finding a dealership that has signed up with bad credit auto lenders starts with finding a special financing dealership. However, you don’t have to do the research yourself if you start your car buying journey with us at Auto Express Credit. We have created a national network of special finance brokers and we want to locate one in your area. Fill out our free auto loan application form and we’ll get to work!